The Cabinet Office has been urged to fix persistent service issues ahead of Capita’s takeover of the Civil Service Pension Scheme’s (CSPS) administration, after a National Audit Office (NAO) report found it failed to hold MyCSP to account or drive improvements through its contract.

The investigation followed a reported rise in the number of complaints about the scheme from 3,335 in 2016/17 to 4,780 in 2024/25, as well as correspondence from scheme members detailing concerns about the service they had received.

As of March 2024, the CSPS had 1.7 million members, including both current and former civil servants, with a total liability for future pension benefits of £189bn.

Since 2016, the Cabinet Office has paid £238m to MyCSP, which under its contract is required to meet 15 key service levels, such as the timely payment of death benefits.

Consistent failure to meet these targets can result in financial penalties for MyCSP.

The report found that MyCSP has reported meeting at least 87 per cent of these key service levels monthly between August 2017 and January 2025, while for other service levels, it has met at least 95 per cent of them every month.

However, it failed in 2024 to deliver timely retirement quotes and first pension payments, including lump sums, to scheme members for several months, incurring a £228,538 penalty.

Additionally, the Cabinet Office applied a penalty of £19,355 to MyCSP in June 2022 for failing to deliver timely payments of retirement lump sums.

Yet, no other financial penalties have been applied since the contract was awarded in 2012.

The Cabinet Office told the NAO that, in the past, MyCSP has successfully requested penalty waivers, citing its year-end profitability and any extenuating circumstances it presented.

The report also showed MyCSP’s contact centre performance has declined over the past two years and is below expected levels of answering at least 80 per cent of calls within 30 seconds.

Over the past two years, the contact centre has, at best, answered 43 per cent of calls within 30 seconds and in November 2024, MyCSP was taking an average of 24 minutes to answer calls.

However, as this is not a key service level, it does not attract a financial penalty, therefore limiting the Cabinet Office’s ability to incentivise improvements to MyCSP’s performance.

In addition to managing the CSPS, the Cabinet Office must also implement a remedy programme in response to the 2018 Court of Appeal ruling that found that the government’s 2015 changes to public sector schemes were discriminatory based on age.

The NAO said the ruling had created a “substantial and complex” programme of work for MyCSP to administer on top of the existing contract expectations.

By the end of 2024-25, the Cabinet Office had spent an additional £31.7m of funding on around 100 MyCSP staff and contractors to implement the remedy, representing approximately 20 per cent of MyCSP’s total workforce.

In 2023, the Cabinet Office awarded Capita a new contract to take over the administration of the scheme from December 2025, with the total value of the contract being £239m for seven years, with the option to extend by a further three years.

However, the report showed that so far, Capita has missed three key milestones in the transition to taking on the administration of the scheme, leading to the Cabinet Office withholding £9.6m in transition payments.

Delays have led the Cabinet Office to agree to a phased rollout with Capita, with greater functionality delayed until at the earliest March 2026.

The new contract is projected to save £83m over its lifecycle compared to MyCSP, driven by innovation and automation.

However, an improvement plan is yet to be provided and there are no fixed milestones for innovation or digitalisation for Capita to deliver against.

NAO head, Gareth Davies, emphasised that the Cabinet Office “must reflect on the lessons learnt” from MyCSP’s administration of the scheme and ensure key performance indicators are monitored and enforced, and that important service improvements are introduced by Capita.

Last month, Public and Commercial Services Union (PCS) members at MyCSP moved toward strike action for “refusing to acknowledge” PCS as the recognised trade union for staff, ahead of the switch to Capita as administrator of the scheme.

Pensions Age has contacted the Cabinet Office for comment.

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